web

Chapter VII (Sections 34) is the most critical part of the Act for practitioners, as it deals with Recourse Against the Arbitral Award.

In 2025 and 2026, the Indian judiciary made a historic shift. For nearly 30 years, the rule was “Set Aside or Uphold.” As of 2026, we have entered the era of “Limited Modification.”

1. The 2025 Revolution: Power to Modify Awards

Until recently, the Supreme Court held in NHAI v. M. Hakeem (2021) that courts could not touch the “merits” of an award—they could only scrap it or keep it. This changed in 2025.

Gayatri Balasamy v. ISG Novasoft Technologies (April 30, 2025):
The Landmark Ruling: A 5-judge Constitution Bench ruled (4:1) that Indian courts do possess a limited power to modify an arbitral award under Section 34.
The “Greater Power” Principle: The court applied the legal maxim omne majus continet in se minus—the greater power to “set aside” includes the lesser power to “modify.”
Strict Conditions for Modification: A court can only modify an award in four specific scenarios:
1. Severability: Striking down an invalid part of the award while keeping the valid portion (if they can be separated without destroying the logic of the award).
2. Clerical/Computational Errors: Correcting obvious typos or math errors apparent on the face of the record.
3. Interest Rates: Adjusting the rate of post-award interest to ensure it is fair and not usurious.
4. Manifest Errors: Correcting “manifest errors” that do not require a fresh look at the evidence or a re-evaluation of the merits.

2. Section 34(2A): Patent Illegality

This ground is only available for domestic arbitrations (not International Commercial Arbitrations).

Jan De Nul Dredging India v. Tuticorin Port Trust (Jan 9, 2026):
The Rule: Reconfirmed that “Patent Illegality” must be an error of law that goes to the root of the matter.
The Warning: A court cannot set aside an award just because the Arbitrator took one of two possible views. If the view is “plausible,” the court must step back.
Arif and Sons India Ltd. v. Intense Impex (Nov 2025):
The Rule: An award granted for “business loss” with zero evidence or zero reasoning is patently illegal. The court held that while the quantity of evidence is the Arbitrator’s domain, a “total absence of evidence” is a jurisdictional flaw.

3. Public Policy and “Shameful Delay”

K. Satyanarayana Raju v. Union of India (Jan 7, 2026):
The Rule: Undue delay can kill an award.
The Decision: The Madras High Court ruled that while “mere delay” isn’t enough to set aside an award, a massive, unexplained delay (in this case, several years) that results in a perversion of the findings makes the award “in conflict with the public policy of India.”

4. Section 34 Summary Checklist (2026 Standard)

Ground	Key Case Law (2025-26)	Court’s Power
Modification	Gayatri Balasamy (2025)	Can Modify if severable or manifest error.
Patent Illegality	Jan De Nul Dredging (2026)	Must Set Aside if error goes to the root.
Public Policy	Satyanarayana Raju (2026)	Must Set Aside if delay or fraud shocks conscience.
Interpretation	Somdatt Builders v. NHAI (2025)	Cannot Intervene if the Arbitrator’s view is plausible.

Important Procedural Note:

If you are moving for a stay of the award under Section 36 while your Section 34 petition is pending, remember the 2021 Amendment (which we discussed earlier regarding Fraud). The court will now look at whether the award was “induced by fraud” as a primary condition for an unconditional stay.

This site is open source. Improve this page.